What makes inflight magazines effective (and what it means for other inflight media)

1. What makes inflight magazines effective(and what it means for other inflight media)

2. Inflight media that works… mustbenefit airlines, passengers and advertisers

3. What makes inflight magazines work Airlines carry magazines to promote their brands. Magazines are inexpensive and easy to distribute, effectively promote products and services, and are generally revenue generating after costs. Passengers read magazines because they are in every seat and the content is relevant to their journey (and because they are locked in an aluminium tube without much else to read). Advertisers understand and support print advertising. Inflight magazines fit a standard ad category, and reach a captive, quantifiable, and affluent audience. And they are on every seat and always on. Publishers can produce high quality inflight magazines profitably because airlines provide the brand and distribution platform, because the pre-defined audience determines the content, and because advertisers support the medium. If any of these components are missing the media will not be self-funding

4. Effective communication vehicle to crew and passengers IFE instructions and listings CEO letter communicates brand and corporate vision New routes, destinations & developments Promotes other airline products and services Bespoke content promotes: Destinations Inflight retail Consumables sales IFE offering (free and pay per view) Connectivity offering One issue typically contains 250-300 embedded ancillary product messages Car rental, bus & train transfers, holiday taxis, airport parking, Hotel bookings, holidays, speedy boarding Travel insurance, foreign currency exchange, etc. Benefits to airline

5. “The reason why [food] sales went down is not enough mags…can we get magazines to EMA immediately??”

6. “Duty free sales on Africa network for 1st quarter are 33% up on the same period...”

7. Benefits to passengers • Relevant content about their destination • Relevant info about airline products and services • Relevant advertising is also a benefit (think about the ads that appear in Vogue, Elle) • Magazines receive strong positive feedback in passenger focus groups

8. Benefits to advertisers • Hard-to-reach, captive audience • Print is one of the standard ad category • Magazines and newspapers • TV • Radio • Internet • Cinema • Outdoor • Simple sell • Frequency and multiple advertising positions • “Do you want to reach all the people on United Airlines?” or“Can you afford not to reach all the people on United Airlines?” • Easy to fulfil

9. Background:Understanding the ad market is the key to evaluating other media opportunities (such as IFE advertising)

10. 1972 to 2008 airline passenger growth

11. 1995 to 2010 global advertising growth CAGR 1995-2008 Total 5.7% Other 16.5% Latin America 6.8% Asia 5.5% Central & Eastern Europe 17.3% Western Europe 4.1% North America 5.1% Source: ZenithOptimedia - 2008

12. The global opportunity (and problem) • Many leading IFE airlines have small domestic ad markets • SQ and CX have less than 20% domestic traffic • From a media buying agency point of view, this equals 80% “other” • Many airlines in big markets (US, China, Japan) have inconsistent IFE service offerings across their fleet • Complexity is toxic in advertising sales

13. The importance of local ad revenues: Ink serves 10,000+ advertisers in 120+ countries 150 sales people selling $50m of inflight advertising this year Broad category and geographic spread Top 50 account for just 11.8% of revenue Only 74% of top 50 advertisers were repeat bookings from previous year Media must align with local markets to get advertisers Problem:IFE is limited in terms of segmentation by origin/dest 3%

14. Category shift… but where does IFE fit? • Print revenues are contracting in line with falling circulation. • Inflight mags don’t have falling circulation, but the category shift creates a sales and marketing problem • Buying agencies are paid to spend, not to think. Local advertisers are different, but IFE is not focused enough. • Problem: IFE does not fit any ad category

15. Being Orthodox:In ad sales you must control the distribution channel

16. “The Inheritance” by Mark BowdenMay 2009 Vanity Fair profile of Arthur Ochs Sulzberger Jr. “When I first heard Arthur talk about being platform agnostic, I knew he was trying to suggest that he was not stuck in a newspaper mind-set. But I thought there were two problems with that language. One is, agnostics are people who don’t—who aren’t sure what they believe in. That’s the first problem. And the second problem is, in practice, there is no such thing as being platform agnostic. You actually have to choose which platform you work on first, which one comes first. ...Platform agnostic means that all the online companies are going to zoom past you, because they’re going to exploit that technology while you’re sitting there thinking, Well, we don’t care which platform we put it on. You need to exploit the technology of each platform. You need to be, in fact, not platform agnostic but platform orthodox.” Mark Bowden quoting Tom Rosenstiel, director of Pew’s Project for Excellence in Journalism

17. Can IFE programming compete in a connected environment? (7,670,000 results for Oslo Norway travel video…)

18. Can IFE compete in a connected environment? (unlimited movies for $34.99 per month)

19. Ad funded media has 4 essential ingredients • Brand • Distribution • Editorial • Ad Sales

20. IFE is not Google (search + classified = 68% of online ad revs) Hans-Joachim Fuhrmann, a spokesman for the German Newspaper Publishers Association, said the Web sites of all German newspapers and magazines together made €100m, or $143m, in ad revenue, while Google generated €1.2 BILLION Euros from search advertising in Germany.

21. Why we avoid “ambient” media (including IFE) IFE advertising Best IFE airlines tend to have small domestic markets (SQ, EK, CX, etc) Some planes/routes have it, some don’t = too complicated Not in (or different system in) every cabin class = too complicated Pax don’t want to view too much advertising / there are few gateway advertising positions (airshow, before blockbusters) = limited potential Not in a major ad category (print, TV, internet, etc) = hard sell Complex fulfillment (airline, hardware suppliers, IFE service providers, encoders, bespoke formats, multiple systems, etc.) = difficult to fulfill There are easier fish to fry!!! Same applies to online magazines, internet TV, sampling, lounge posters, duty free shopping bags, meal tray cards, napkins, etc. Nomenclature: Why would you choose “ambient” advertising anyway?!

22. Be orthodox about “ambient” ad projects Media must have a benefit to the airline, passengers and advertisers Ambient media doesn’t promote airlines products or entertain passengers Small revenue potential and no frequency Avoid logistical and fulfilment complexity Fulfilling head rest covers, napkins, tray tables, etc. is logistically challenging (Complex base and route structure means fulfilment is difficult) Anything that involves multiple departments in an airline is remarkably difficult to execute Make sure media has good distribution and visibility Media must be constantly visible and available (Newsstand dynamic) Bags, cups, trays, napkins, refreshment packs, meal boxes, menu cards, luggage tags, and headrest covers all have limited visibility and often suffer from erratic distribution. IFE has bad visibility and few effective positions (e.g. ads before blockbusters and airshow route map only) Stick to traditional advertising categories IFE and “ambient” are off piste, therefore much harder and more expensive to sell

23. On the positive side, media that covers some/all of distribution cost benefits airlines Boarding pass advertising (value to airline, essential to passengers) Reservation confirmations/itineraries boarding passes Pre-flight/check in emails Sell it as print advertising (this is not about click-throughs) Onboard Wi-Fi Portals (either at the gate or persistent advertising) Good for revenue contribution, but not enough cover part of the cost of the gateway (or bespoke content for that matter) Content / advertising before the gate? Gogo vs. Row44 Southwest: who owns the customer? Effectiveness will be greatly enhanced if advertising can be origination/destination specific

24. Jeffrey O’Rourke Chief Executive +44 7887 852 881 UK +852 9741 7618 HK jeffrey.orourke@ink-publishing.com www.ink-publishing.com